Microsoft inside?
Microsoft Business Solutions wants to sell enterprise software widgets to other apps vendors
By Roberto Michel, Editor -- Manufacturing Business Technology, 11/1/2002 12:00:00 AM
Doug Burgum says the view that most pundits have on the rise of Redmond, Wash.-based Microsoft Corp. in the enterprise software market is growing a bit stale. Burgum, who is president of Microsoft Business Solutions, says that rather than seeing his division as locked in mortal combat with enterprise software suppliers, he sees them as potential customers.
That's right, customers—and not just for Microsoft's database or operating systems, but as buyers of enterprise software "components" from Microsoft Business Solutions. Speaking at Stampede, Microsoft Business Solutions' worldwide partner conference held in Minneapolis in September, Burgum said selling components to other vendors will mean big business for the division, which offers enterprise resources planning (ERP) and accounting software.
"I would predict that in five years, a lot of our revenue will come from selling through other people's solutions, as opposed to us knocking [other vendors] out of the park," says Burgum, who was the long-time chief executive of Great Plains, an ERP and accounting software vendor Microsoft acquired in early 2001. Microsoft added to its lineup of small- to mid-market-focused ERP and accounting solutions by acquiring Navision earlier this year.
Microsoft Business Solutions is consolidating and changing some product names, but its ERP products will continue to be enhanced while the division moves to a common code base and next-generation software. Burgum says as Microsoft builds that common framework, some base components—for example a "debit/credit engine"—could be sold to other software vendors.
Burgum acknowledges that Microsoft Business Solutions competes with some mid-market enterprise software players, and also brushes up against the Tier 1-focused ERP players, but he adds that the business applications market is more "highly fragmented" than other markets Microsoft has gone after in the past. What's more, he predicts, it will remain fragmented, with "hopefully a lot of that fragmentation occurring on top of our platform, driven by people OEMing components of our software."
Just how far can Microsoft push this component resale strategy? While Burgum used examples of core financial/accounting functionality, the division also sees certain supply chain-oriented components as having potential for an Intel-like business model.
"Some manufacturing and supply chain components could apply to this model, such as bill of material functions, or routings, or work order management," says Mike Frichol, general manager, manufacturing solutions. "Application vendors could build niche solutions on top of the base functions."
Katherine Jones, a research director with Aberdeen Group, a Stamford, Conn.-based analyst firm, isn't so sure that component reselling can cross over into supply chain functionality. "The concept seems to have the most potential for base financial functions such as general ledger," she says.
Using application components from Microsoft would not be a radical departure from using its systems-level products, says John Hiraoka, a senior vice president with Epicor, an Irvine, Calif.-based enterprise suite vendor that targets small- and medium-size manufacturers. Already, he says, Epicor makes use of a financial reporting solution from FRx Software Corp., which is part of Microsoft Business Solutions. "You can and will have some of these environments," says Hiraoka.
At Stampede, Microsoft also announced the eEnterprise and Dynamics ERP products will go forward as the "Great Plains" suite. The Attain ERP suite originally developed by Navision now is called the Navision suite. This leaves four key enterprise systems products of interest to manufacturers from the division: the Great Plains, Navision, Axapta, and Solomon suites. According to Frichol, the first three suites are comparable in manufacturing and supply chain functionality, with the main difference being "the Great Plains solution is more highly packaged, whereas Navision and Axapta are more suited to prospects that wish to customize a solution."
The Solomon suite has "light manufacturing" capability, says Frichol, but with strengths including project accounting and inventory management. Microsoft plans to extend and enhance all four solutions over the long term, moving them to a common code base, while also developing a "unified global solution," says Satya Nadella, a Microsoft Business Solutions vice president.
Nadella says the existing product lines will gain more commonality and become more like "editions" than the completely different products they are today. When the next-generation system is ready in about three years, customers current on maintenance will be able to migrate to like functionality without having to repurchase the functions they already have.
Finally, Microsoft is "surrounding" its existing ERP suites with common solutions, such as an enterprise portal and a customer relationship management system.
Jim Shepherd, a senior vice president with Boston-based analyst firm AMR Research, says Microsoft's ERP product strategy appears sound. "Of course, you'd like to have fewer ERP solutions rather than multiple ones, but that's a function of their history," says Shepherd. "They are right in not forcing customers to migrate, because that just doesn't work."
Analysts, including Shepherd, say that despite Microsoft's position as a key partner to mid-market software vendors, there is no getting around the fact that Microsoft increasingly competes with them. "They are clearly a competitive threat," says Shepherd. "The mid-market players will have to differentiate on domain expertise to succeed.
